ManagementManagement IntegrationIntegration betweenbetween DoutorDoutor CoffeeCoffee andand NipponNippon RestaurantRestaurant SystemSystem April 26, 2007 Doutor Coffee Co., Ltd. Nippon Restaurant System Inc. Contents 1. Background of the Management Integration 2. Purpose of the Management Integration 3. Basic Management Policies for the Integration 4. Company Descriptions 5. Positioning in the Restaurant Industry after the Integration 6. Management Objectives 7. Strategies for the Holding Company 8. Synergies anticipated from the Management Integration 9. Schedule for the Stock-Transfer 10. Structure of the Management Integration 11. Outline of the Holding Company 12. Directors and Auditors 13. Time Schedule for the Integration 2 １．Background of the Management Integration ChangingChanging environmentsenvironments surroundingsurrounding thethe twotwo companiescompanies Situation of the restaurant Consumer trends Social and economic industry situations z Declining size of the domestic market z z Declining size of the domestic market z IncreasedIncreased awareness awareness for for safety safety and and z health z Aging and declining population zCompaniesCompanies from from other other sectors sectors and and health z Aging and declining population foreign companies entering the market z z Changes in the population structure foreign companies entering the market z ConsumersConsumers becoming becoming more more and and more more z Changes in the population structure z Reorganization of the industry and selective z Widening gap between social classes z Reorganization of the industry and selective z Widening gap between social classes increased number of mergers and z increased number of mergers and z IncreasedIncreased preference preference for for convenience convenience acquisitionsacquisitions Only a small number of companies with high competitiveness can survive NewNew valuesvalues toto bebe createdcreated byby thethe integrationintegration ofof DoutorDoutor CoffeeCoffee andandNippon Nippon RestaurantRestaurant System,System, twotwo strongstrong companiescompanies inin thethe areasareas ofof ““drinkingdrinking”” andand ““eatingeating”” 3 2. Purpose of the Management Integration MeetingMeeting thethe diversifieddiversified expectationsexpectations ofof thethe consumersconsumers PromotingPromoting innovativeinnovative shopshop developmentdevelopment through through synergysynergy effectseffects brobroughtught aboutabout byby thethe combinationcombination ofof businessbusiness developmentdevelopment capabilitiescapabilities andand storestore develdevelopmentopment capabilitiescapabilities Maximizing the enterprise value as a group BecomingBecoming anan ““ExcellentExcellent LeadingLeading CompanyCompany”” inin thethe JapaneseJapanese restaurantrestaurant industryindustry 4 3. Basic Management Policies for the Integration FieldField workwork isis thethe highesthighest prioritypriority ServingServing ourour customerscustomers isis thethe basicsbasics ofof allall MutualMutual respectrespect betweenbetween thethe twotwo companiescompanies andand treatingtreating eacheach companycompany equallyequally CreatingCreating aa corporatecorporate cultureculture thatthat isis openopen andand challengingchallenging ActiveActive communicationcommunication amongamong employeesemployees 5 4. Company Descriptions (1/2) DoutorDoutor Coffee Coffee NipponNippon Restaurant Restaurant System System FiguresFigures after after the the integration integration (Simply(Simply added added the the results results of of two companies) FiscalFiscal Term Term MarchMarch 2007 2007 MayMay 2006 2006 two companies) SalesSales 68.668.6 billion billion yen yen 27.827.8 billion billion yen yen 96.496.4 billion billion yen yen OrdinaryOrdinary Income Income 4.74.7 billion billion yen yen 5.95.9 billion billion yen yen 10.610.6 billion billion yen yen RatioRatio of of Ordinary Ordinary 6.8 ％％ 21.1％％ 11.0%11.0% IncomeIncome to to Sales Sales 6.8 21.1 TotalTotal Assets Assets 53.453.4 billion billion yen yen 3434 billion billion yen yen 87.487.4 billion billion yen yen NumberNumber of of 992992 753753 1,7451,745 EmployeesEmployees NumberNumber of of Stores Stores 1,4701,470 318318 1,7881,788 NumberNumber of of 6 34 4040 StoreStore Formats Formats 6 34 MainMain Format Format DoutorDoutor Coffee Coffee Shop Shop YoumenyaYoumenya Goemon Goemon “Drinking”“Drinking” & & “Eating” “Eating” 6 4. Company Descriptions (2/2) SharingSharing managementmanagement DoutorDoutor Coffee Coffee resourcesresources andand NipponNippon Restaurant Restaurant System System knowknow-how-how Highly profitable management by accumulated AA leading leading company company in in the the caf caféé industry industry Highly profitable management by accumulated knowknow-how-how of of restaurant restaurant business business z Brand development capability zz StoreStore development development capability capability using using franchise franchise system system z Brand development capability • Multiple brand development having Youmenya •• Accumulated Accumulated know-how know-how to to manage manage franchise franchise • Multiple brand development having Youmenya Goemon as the core brand storesstores Goemon as the core brand z Self-contained system zz Self-containedSelf-contained business business model model z Self-contained system • Has the self-contained system where it carries out •• Maintains Maintains the the quality quality of of the the products products by by completing completing • Has the self-contained system where it carries out procurement, processing and distribution of food, thethe procurement procurement and and roasting roasting process process on on its its own own procurement, processing and distribution of food, andand designing designing and and maintenance maintenance of of stores stores on on its its own own zz StrongStrong brand brand recognition recognition in in Japan Japan z Selective locations of stores •• Doutor Doutor Coffee Coffee has has sales sales network network throughout throughout z Selective locations of stores • The stores are located in large cities with the Japan,Japan, and and the the number number of of people people who who use use Doutor Doutor • The stores are located in large cities with the population higher than 1 million, and near the train CoffeeCoffee Shop Shop has has reached reached as as many many as as 220 220 million million population higher than 1 million, and near the train stations perper year year stations 7 5. Positioning in the Restaurant Industry after the Integration Sales Ordinary Income Number of stores （FY2005） （FY2005） （FY2005） MCDONALD'S MCDONALD'S 325,655 PLENUS 15,760 3,802 HOLDINGS HOLDINGS ZENSHO 149,258 NEW COMPANY 10,557 PLENUS 2,390 REX 148,373 ZENSHO 10,532 NEW COMPANY 1,707 HOLDINGS YOSHINOYA REX KENTUCKY FRIED 122,386 6,370 1,501 D&C HOLDINGS CHICKEN JAPAN PLENUS 120,926 DOUTOR COFFEE 5,392 MOS FOOD 1,472 SERVICES ROYAL NIPPON RESTAURANT REX 101,533 5,165 1,425 HOLDINGS SYSTEM HOLDINGS ROYAL COLOWIDE 93,064 5,014 DOUTOR COFFEE 1,424 HOLDINGS SAINT MARC KOZOSUSHI NEW COMPANY 92,653 5,009 1,137 HOLDINGS SO-HONBU OHSHO FOOD WATAMI 82,671 5,009 HURXLEY 1,061 SERVICE DAISYO 80,741 SAIZERIYA 4,498 ICHIBANYA 1,010 0 100,000 200,000 300,000 400,000 0 5,000 10,000 15,000 20,000 0 1,000 2,000 3,000 4,000 （million yen） （million yen） （stores） Source：Financial reports (FY2005) of listed companies classified as “Restaurants” by NOMURA Sector Classification System Note：”NEW COMPANY” represents the sum of “DOUTOR COFFEE” and “NIPPON RESTAURANT SYSTEM” 8 6. Management Objectives AimingAiming toto becomebecome anan ““ExcellentExcellent LeadingLeading CompanyCompany”” inin thethe JapaneseJapanese restaurantrestaurant industryindustry ExpectedExpected Mid-TermMid-Term GoalsGoals (FYE(FYE FebFeb 2011)2011) SalesSales 110 110 billion billion yenyen ––120120 bbillionillion yenyen OrdinaryOrdinary IncomeIncome 14 14 billionbillion yenyen –– 15 15 billionbillion yenyen TheThe three-yearthree-year businessbusiness planplan afterafter thethe integrationintegration isis expectedexpected toto bebe completedcompleted beforebefore MarchMarch 2008. 2008. CreationCreation ofof “active“active investment”investment” opportunities opportunities forfor furtherfurther growthgrowth EstablishmentEstablishment ofof restaurantrestaurant industryindustry asas aa “system“system industry”industry” AimingAiming forfor overseasoverseas opportunitiesopportunities asas aa “Japanese“Japanese Brand”Brand” 9 7. Strategies for the Holding Company “Multi-Brand Strategies” Enhance profitability (offense) and avoid risk (defense) in order to realize stable business operations StoreStore developmentdevelopment takingtaking advantageadvantage ofof synergiessynergies broughtbrought aboutabout byby thethe combinationcombination ofof businessbusiness developmentdevelopment capabcapabilityility andand franchisefranchise know-howknow-how DevelopmentDevelopment ofof aa newnew businessbusiness modelmodel byby thethe combinationcombination ofof “drinking”“drinking” and and “eating”“eating” RestructuringRestructuring ofof existingexisting brandsbrands byby sharingsharing thethe twotwo companies’companies’ know-howknow-how 10 (Reference) Multi-Brand Strategies Lifecycles of brands <Growing phase> <Establishment phase> Innovative Shop Development Restructuring of brands New New Format Model <Developmental phase> <Transition phase> 11 8. Synergies anticipated from the Management Integration •• NewNew format format development development NewNew Business Business •• NewNew business business